Tag: supply chain

As a fellow blogger recently highlighted, the demand for new electronics, such as cell phones and computers, is insatiable and has numerous, serious side-effects. Congress took notice and passed the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010 urging the Securities and Exchange Commission (SEC) to adopt a rule pertaining to transparency in the supply chain of electronics. The SEC made the rule final concerning conflict materials on August 22, 2012. The ruling calls for any company (who reports to SEC) requiring the use of gold, tin, tungsten, or tantalum to create a public report identifying the minerals’ countries of origin. On May 31, 2014, companies using these minerals in any product are required to issue the first annual report. The specific requirements of the ruling can be found on the SEC website here http://www.sec.gov/news/press/2012/2012-163.htm.

Let’s focus on the cell phone, the iPhone in particular, as we discuss the minerals identified in the ruling. Dave Gilson of Mother Jones magazine compiled a list of components making up a 16GB iPhone 3GS. This is what he came up with: The phone uses 12 parts that are gold-plated. Circuit boards within the phone are fused with tin. Tungsten is used in the vibrate functions. Last, but certainly not least, inside the phone is a tantalum capacitor, which stores electricity. (Once broken down, the mineral coltan, as discussed in the previous blog, creates two elements: niobium and tantalum.) Many consumers are unaware of the presence of these materials in their goods, and even if they are cognizant, electronics companies aren’t required to provide that information. Furthermore, it’s unlikely that the companies could guarantee the origin of the minerals used to create their products.

Sasha Lezhnev and John Prendergast wrote an article in 2009 on behalf of the Enough Project examining the supply chain of these minerals. The chain is broken down into six steps starting at the mine, ending with the electronics companies, but gets more obscure along the way. The mineral is extracted at the mine, and taken to the trading house, which may or may not be registered. At this point it is apparently still easy to tell mineral origins according to striations and color. Next come the exporters and the murky water. The transaction between the exporter and the trading house do not include official documentation of mineral origins. At best there may be verbal confirmation. During the fourth step the minerals are moved to transit or neighboring countries where the starting point is further forgotten. On to the refiners, usually in Asia, to create metals from minerals sourced from a variety of locations. Lastly, the electronics company received their product and hand them out to unsuspecting customers. It sounds like globalization and the world supply chain fast at work; however, the countries with the mines and others along the route are suffering.

These minerals come from a variety of places, such as East Asia and Africa. With the popularity of smartphones and other electronics, these minerals are in extreme demand. One would think that with such a highly sought after natural resources the countries would be rich and thriving, yet they are in conflict. This unfortunate paradox has coined the term conflict minerals. The Democratic Republic of Congo is an un-lucky example. Violence, poverty, and human rights violations are the past and present of the DRC, and can be largely attributed to these resources. The minerals finance the war, as armed groups use violence to control the mines as a way to support their troops, pay for supplies, and gain economic and political power. The 2012 Enough Project Report states that recent effects of the Dodd-Frank Wall Street Reform Act have decreased the ability of armed groups to acquire finances from conflict minerals by 65 percent in the past two years. However, with the renewal of the M23 rebellion in the Congo, there may be an increase in the smuggling of conflict minerals to neighboring transit countries and beyond.

Now is the time to enforce transparency in the global supply chain of electronics, starting with raw materials. The recent rulings have made an impact, but during the rise of armed conflict in the area, pressure needs to continue from consumers, SEC, companies, and governments. Although I doubt that we can curtail the demand for such electronics in our technology-focused world, there needs to be focus on the demand end of the supply chain. This means that consumers need to be conscious and companies held responsible. Engaging the public will help the SEC to enforce it’s ruling, and forces the electronics businesses to comply. The Dodd-Frank Act is a first step in encouraging certifications and regulation levels. It is hopeful that movement in this direction will spur other countries and policy makers to adopt miner safety and empowerment guidelines. With the current situation in the DRC specifically, there is a need to maintain current advances in conflict materials.

There are plenty of limitations to the current ruling beyond armed rebels groups such as M23 in the DRC. Some skeptics claim the electronics companies are not ready for these changes, and won’t be able to produce a product with traceable resources. Others say that the electronic product is too complex and made of too many parts to be traced back to individual locations. There is worry that production could stop with a lack of available and appropriate resources . On the other hand, there is also a fear that legitimate mines may suffer as the crackdown takes place . What do you think? As a consumer, do you think you would be more apt to buy a conflict-free electronic? Are electronics companies ready and capable to implement this change?

Kylie Millbern is a graduate student in the Conflict Resolution program at UMass Boston.